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IMF Statement at the Conclusion of the 2011 Consultation Mission to Uzbekistan

Wednesday 16 November 2011

(Press release) – An International Monetary Fund mission led by Mrs. Veronica Bacalu, Deputy Division Chief in the IMF Middle East and Central Asia Department, visited Tashkent on November 2-15, 2011 to conduct discussions in the context of the Article IV consultation.

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

David Owen, Deputy Director of the Middle East and Central Asia Department, participated in the discussions at the beginning of the mission and made a presentation on the global and regional economic outlook for representatives of ministries and government agencies.

At the conclusion of the mission, Mrs. Bacalu issued the following statement today in Tashkent:

Uzbekistan has achieved robust growth since the mid-2000s and has withstood the global financial crisis well. At 8½ percent on average over the last five years, Uzbekistan’s growth is higher than the average growth in Central Asia. Fiscal surpluses registered over the past years, high official reserves, low public debt, a stable banking system, and prudent borrowing from international financial markets have shielded the country from the direct impact of the global crisis.

GDP growth was reported at 8½ percent in 2010 and is at 8.2% through September 2011; and inflation has increased somewhat in recent months. Strong growth was registered in services, transport and communication, trade, and agriculture and was driven by buoyant domestic consumption supported by large wage and pension increases. Investment has also continued, led by government’s industrialization program and supported by higher foreign direct investment.

The mission expects GDP to grow by 8.3% in 2011 with strong economic growth projected to continue over the medium term. Growth will continue to be supported by government’s policies to boost domestic consumption and investment and high commodity prices (projected to stabilize around current levels) for the Uzbek exports. External and fiscal positions are expected to stay strong.

Important initiatives were undertaken in 2011 to support small businesses and facilitate private sector development. The authorities have initiated commendable measures, including streamlining access to bank financing, simplifying registration and issuance of permits, extending the moratorium on tax inspections for newly created small enterprises from 2 to 3 years; and simplifying customs certification procedures.

The main challenge in the short run is the need to bring inflation down through effective macroeconomic and financial sector policies. Over the medium term, the main challenge is to further increase the real income per capita by raising productivity and ensuring sustainable and inclusive growth. To this end, the mission welcomes the ongoing government programs to create new jobs for the young and growing population and continue strengthening social protection. In addition, the authorities of Uzbekistan have rightly embarked on a series of ambitious programs to modernize and diversify the economy, including exports, and increase the role of the private sector. Moreover, substantial increases in bank capitalization contributed to the stability of the banking sector and are facilitating the authorities’ development programs.

To succeed with these programs, the authorities should continue tightening monetary policy and pursue a more flexible exchange rate; undertake measures to further deepen financial sector intermediation; continue reforms, particularly in the exchange system, tax administration, public finance management and governance; and improve the quality and dissemination of data.

The mission underscored that the Fund staff stands ready to assist Uzbekistan in its reform efforts, including through technical assistance.

The mission is grateful for the excellent cooperation with the Uzbek authorities and the constructive discussions.

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